The growing demand for an Africa Credit Rating Agency (CRA) is becoming urgent as the continent contends with what many see as unfair and detrimental credit ratings from global agencies.
Establishing an Africa-focused CRA is viewed as a pivotal step in providing a more balanced and accurate assessment of the region’s economic potential, improving access to capital markets, and bolstering investor confidence.
At the High-Level Dialogue on the establishment of an Africa CRA, Dr. Claver Gatete, Executive Secretary of the United Nations Economic Commission for Africa (ECA), indicated that African countries have long been disadvantaged by the major global credit rating agencies—S&P Global Ratings, Moody’s, and Fitch Group. These agencies often assign low ratings to African nations, exacerbating their economic struggles.
“Currently, out of 33 African countries with sovereign credit ratings from at least one of the three major agencies, only two (Botswana and Mauritius) are in the investment grade. Moreover, three African frontier market countries (Ethiopia, Ghana, and Zambia) have defaulted on their sovereign debts. All three have approached the G20 Common Framework for debt treatment, but the process has been lengthy and complex,” Dr. Gatete explained.
He further noted that, “The fiscal space has been put under pressure by rising borrowing costs, reduced investor confidence, triggered capital flight, and aggravated risk perceptions. Credit rating downgrades have been a major contributor to these factors.”
In 2023 alone, 17 downgrades were recorded across nine African countries, with only the Republic of Congo receiving an upgrade. This trend has significantly increased debt repayment costs, with approximately 60% of African countries now allocating more resources to external debt interest payments than to critical investments in social programs and climate initiatives.
These rising costs come at a time when Africa urgently needs to mobilize resources to meet its Sustainable Development Goals (SDGs) and Agenda 2063 objectives.
“These trends cannot continue if we mean business about Africa becoming the global solutions powerhouse,” Dr. Gatete warned.
It was pointed out that Africa’s immediate challenge is securing financing for its development and the need for investment in domestic markets. A functioning Africa CRA, Dr. Gatete noted, would offer a more accurate assessment of African economies’ financial health and facilitate improved access to capital markets.
“An Africa Credit Rating Agency offers a strategic opportunity to complement the existing global rating agencies. It will serve as an important capacity-building tool for African institutions involved in the rating process and prepare them for future interactions with the agencies.”
He urged African countries to collaborate in defining the strategic and operational frameworks of the Africa CRA, fostering dialogue, and encouraging innovation and partnerships.
